As Greece lurches from one crisis deadline to another to try to save its beleaguered economy and banking system, cash continues to flee the country.
European leaders in Brussels reportedly reached a third bailout deal for Greece on Monday morning, after more than 17 hours of talks on the thorny subject of reforms and more financial aid for the near-bankrupt country.
But as talks have dragged on, Greek households and companies have been siphoning money out of the banking system at an accelerated date. This year, in the five months ended in May (the latest data available) some households, companies and other depositors drained some 37 billion euro from the Greek banking system—or about 18 percent of the total.
That’s left Greek banks starved for cash. They’ll need somewhere between 10 to 14 billion euros of fresh capital to keep them from going under, a senior Greek banker told Reuters on Friday.
Now entering the third week of a bank shutdown, Greek depositors have been pulling an estimated 80 to 100 million euros a day from ATM machines that banks have been struggling to replenish with an emergency cash infusion from the European Central Bank. Additional transfers have been authorized for essential imports, according to Reuters.
Bur even if Europe’s central bank agrees to send more cash, the Greek banking system is a financial mess. The collapsing economy has created an expanding pile of bad debts that have further burned through Greek banks fragile capital cushion.
Despite periodic banking crises around the world, there aren’t a lot of precedents for the current Greek financial tragedy, according to Pew Research
Of the 147 banking crises identified between 1970 and 2012, only seven involved bank closures and asset freezes. Most of those were in Latin America. The most recent, in 2013, forced a bank holiday in Cyprus as part of an EU/IMF bailout.
Most bank holidays last a week or less, according to the study. But even after banks reopen, restrictions on withdrawals or transfers can last for months or even years, the researchers said. Capital controls imposed in Cyprus in 2013 weren’t lifted until this past April, they noted.